President Donald Trump recently signed Executive Order #14330, “Democratizing Access to Alternative Assets for 401(k) Investors,” which aims to expand investment options in 401(k) plans beyond traditional stock and bond funds. This includes the inclusion of private loans, crypto, real estate, and private equity.
Private equity represents ownership shares of companies that are not publicly traded, similar to how stocks represent ownership of publicly traded companies. Private equity investors aim to sell their shares at a higher price in the future, much like stock market investors. These investments were previously only available to high-net-worth and institutional investors, not retail investors or retirement accounts.
The executive order is just the starting point for potentially allowing private equity investments in 401(k) plans. Regulatory changes, such as those instructed by the Department of Labor and the Securities and Exchange Commission, will need to be made to open up these options. Historically, such changes can take years to implement, so it may be a while before investors can actually include private equity in their retirement accounts. The scoring system for online brokers and robo-advisors considers more than 15 factors, such as account fees, investment choices, customer support, and mobile app capabilities. This comprehensive evaluation helps users make informed decisions about their investments.
“We need to focus on educating investors so they don’t approach 401(k) investing with a short-term mindset,” she emphasized.
Is it possible to invest in private equity currently?
Private equity is not yet an option in 401(k) plans. Typically, it is only accessible to accredited investors (individuals with a net worth of at least $1 million excluding their primary residence, an annual income of $200,000 or more, or specific financial professional certifications).
However, if you are keen on exploring private equity before it is included in 401(k) plans, there are ways to bypass the accredited investor requirement.
Real estate crowdfunding platforms
provide retail investors with similar opportunities in non-public real estate projects. Additionally, certain private equity firms like Blackstone Inc. (BX) and Brookfield Asset Management (BAM) are publicly traded. There are also ETFs that invest in publicly traded private equity firms, such as the Invesco Global Listed Private Equity ETF (PSP) and the ProShares Global Listed Private Equity ETF (PEX).
Some
robo-advisor firms
featured on BW offer non-accredited clients exposure to private equity.
Titan
, for instance, presents an investment strategy centered on the ARK Venture Fund, which focuses on early-stage startups. This option allows investors to sell quarterly, though it’s not guaranteed.
Fidelity Go
is another robo-advisor that provides a private equity strategy, but it is limited to accredited investors.
At the time of publication, neither the author nor editor held positions in the mentioned investments.
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